October 22, 2024

Permission to republish original opeds and cartoons granted.

Trump is right on not taxing Social Security benefits

By Rick Manning

Everyone who gets a paycheck knows about social security taxes.  In fact, many parents have experienced watching their teen’s face turn from excitement to confusion and sometimes anger when he/she gets the first paycheck, as they wonder who this FICA fellow is who is taking so much money and why they have money deducted for withholding and Medicare. 

That FICA fellow is Social Security. And the money taken out gets taxed when it was earned.

Americans don’t pay taxes on after-tax dollars, we pay them on our gross income.

From a practical retirement perspective, this makes Social Security income much more like a Roth IRA than a 401(k) contribution.

A 401(k) retirement contribution defers taxes until the money is withdrawn and is a way of minimizing federal taxes paid during what are presumed to be the person’s highest earning years, instead pushing them back to the tax rates on lower earning years after retirement.

The Roth IRA on the other hand allows people to put already taxed income into retirement savings with the advantage that both the contribution amount and whatever investment gains that accumulate over time are treated as tax free upon withdrawal once retirement age is reached.

Both of these voluntary retirement choices are based upon the idea that you either pay now or you pay later.

Unfortunately, as currently applied, the involuntary Social Security tax — which impacts about half of all seniors, or about 30 million — is a pay now and pay later scheme. By 2050, the Social Security Administration says the percent of seniors paying taxes on their benefits will rise to 56 percent, as the tax thresholds were never indexed for inflation. This was so that one day, everyone would pay taxes on their benefits, by design.

President Donald Trump’s plan to end the taxation of Social Security payments stops this clear case of taxation of already taxed income.

But it also encourages those who are collecting Social Security to continue working while collecting taxable 401(k) benefits.

The idea that earned Social Security income causes higher taxes on other income being earned is clearly a disincentive to stay in the workforce for a few extra years, and continuing to pay federal taxes.

The argument against ending the double taxation of Social Security benefits is that it will have a negative impact on the budget. Currently, about 3.8 percent of Social Security Trust Fund income, $50.7 billion, and 8.4 percent of Medicare Trust Fund income, $35 billion, comes from taxes on Social Security benefits, according to the Congressional Research Service.

But even without the Trump plan, the trust funds are set to run deficits through 2033 when they will be exhausted, according to the Trustees. So, cutting taxes on benefits is not the fundamental cause for the deficits, which are in part driven by lower birth rates resulting in relatively fewer taxpayers.

The real question is why the government trust funds including for Social Security and Medicare — the federal government’s intergovernmental holdings of non-marketable treasuries constitute about $7.36 trillion — are only earning an average 4.26 percent interest in 2024, according to the Social Security office of chief actuary.

That is well below the rate of return for comparable retirement investments — 401ks are said to average between 5 to 8 percent annual return — that have far higher returns by investing in things other than government paper. Heck, that’s not even keeping up with the average 4.9 percent annual consumer inflation since 2021.

Whether the Trump plan to cut taxes on Social Security benefits were to ever come to fruition, it is clear that the current system is a designed cut in those benefits.  

At some point in the near future, Congress will have to address the overall Social Security system to determine how to make it solvent. Whether that is accomplished by getting a better return for the trust funds before they become depleted, changing the payment exemptions when incomes reach a certain threshold, allowing a reduction in payments to 80 percent of current levels to take effect or any number of other ideas, the idea of continuing the bad idea of taxing both the initial payment of payroll taxes and the Social Security benefit payout is wrong-headed.

The upside of Trump’s plan really has to do with the incentives to continue working, as those claiming this negative impact are ignoring the compensatory value of seniors continuing to work due to ending this tax disincentive. Most people don’t realize that once you decide to take Social Security while working, you continue to pay taxes into that system without the advantage of having your monthly benefit increase due to the continuing contribution. 

So, working seniors who collect Social Security make a direct contribution to the system every additional day they work, and derive zero additional benefit, so every single dollar the government takes from their paycheck goes to help increase the solvency of the overall system. Under the Trump plan, at least they’d get to keep all of their benefits.

Finally, Social Security is set up like a fixed income insurance policy. You pay the federal government over the course of a lifetime and when you can legally collect on the policy, the amount you get paid is dependent upon the amount you paid calculated along with how long you are expected to collect the payment.

This is why each person approaching retirement is provided options of how much their payment would be if they retire at the age of 62 all the way up to the maximum age of 71 depending upon how much they have paid into the system and for how long. Also, the longer you wait to collect payments, the more you get, but the risk is if you die early the benefit gets significantly reduced to pay your designated survivor who gets to choose between their Social Security benefit or yours with the smaller amount going back into the Social Security Trust Fund.

Ultimately, our nation’s tax code is filled with different incentives to do everything from buying an electric vehicle to take out a mortgage on your home. It is inherently fair to stop Social Security’s double taxation, either exempt it from taxes during the collection process or exempt the benefits from being taxed. We should stop punishing seniors who work.

Americans from both sides of the aisle should embrace Donald Trump’s proposal to end double Social Security taxation.

Rick Manning is the President of Americans for Limited Government.

To view online: https://dailytorch.com/2024/10/trump-is-right-on-not-taxing-social-security-benefits/

Video: Kamala Harris Takes Drastic Action Against Church Members

To view online: https://www.youtube.com/watch?v=6iUCD_Allng

Trump gains momentum in polls, leads every single battleground state, narrows Harris' national lead in popular vote

By Robert Romano

Don’t look now, but former President Donald Trump is gaining critical momentum in October against Vice President Kamala Harris as the presidential election of 2024 draws to a close, with Trump leading the averages of swing state polls taken in Arizona, Nevada, Wisconsin, Michigan, Pennsylvania, North Carolina and Georgia and narrowing Harris’ lead in the national popular vote, according to RealClearPolling.com.

In Arizona, Trump leads the current polling average 49.1 percent to 47.3 percent, a 1.8 percent edge.

In Nevada, Trump leads 47.6 percent to 46.9 percent, a 0.7 percent edge.

In Wisconsin, where it is very close, Trump leads 48.3 percent to 47.9 percent, a 0.4 percent edge.

In Michigan, Trump leads 48.4 percent to 47.2 percent, a 1.2 percent edge.

In Pennsylvania, Trump leads 47.9 percent to 47.1 percent, a 0.8 percent edge.

In North Carolina, Trump leads 48.4 percent to 47.9 percent, a 0.5 percent edge.

In Georgia, Trump leads 48.9 percent to 46.4 percent, a 2.5 percent edge.

It is quite a momentum shift, where a month earlier Harris led a number of those averages, and it comes in states that, with the exceptions of North Carolina (Trump won it twice) and Nevada (Trump lost it twice), Trump had won in 2016 but lost in 2020.

Nationally, a similar pattern of Trump’s momentum has emerged, with Harris leading the two-way race 49.3 percent to 48.5 percent, just a 0.8 percent edge, and the multi-candidate race 47.4 percent to 46.5 percent, a 0.9 percent edge.

Not only is that within the polls’ margins for error, they are within polls’ historic incapacity to properly gauge Trump’s support in 2016 and 2020, when polls overstated Democrats’ leads in the popular vote by about 2 points. If the same thing happens in 2024, with the national race so close, Trump might even win the popular vote in what would be a first for a Republican since 2004.

In the most recent averages, there are even a couple of polls that actually show Trump ahead, with Fox News showing Trump leading 50 percent to 48 percent and Atlas Intel showing Trump up 51 percent to 48 percent, with both polls taken mid-October.

Note, these are snapshots by polls that assume everyone who says they’re going to vote actually does go vote.

In politics there are no guarantees. Just ask Thomas Dewey, who according to polls in 1948 thought he would easily defeat Harry Truman, leading papers to pre-print the Dewey win, but when the election occurred, the opposite happened. Or Hillary Clinton, who polls said had the election in hand against Trump, but who lost. 

Still, Trump’s visible momentum tells us something is afoot, with public anxieties about inflation still outpacing wages and millions of illegal immigrants still flooding the border, that there is a lot of dissatisfaction with the incumbent administration represented by Harris, whose media-contrived honeymoon appears to be over. It’s still very close, and as usual, stay tuned.

Robert Romano is the Vice President of Public Policy at Americans for Limited Government Foundation.

To view online: https://dailytorch.com/2024/10/trump-gains-momentum-in-polls-leads-every-single-battleground-state-narrows-harris-national-lead-in-popular-vote/